Netweb Technologies India Ltd. (NSE: NETWEB) Q2 2025 Earnings Call dated Oct. 21, 2024
Corporate Participants:
Sanjeev Sancheti — IR Advisor
Sanjay Lodha — Chairman & Managing Director
Prawal Jain — Chief Financial Officer & Chief Human Resource Officer
Hirdey Vikram — Chief Sales and Marketing Officer
Analysts:
Hardik Rawat — Analyst
Yash Gandhi — Analyst
Rohit — Analyst
Akshay — Analyst
Chirag Khasgiwala — Analyst
Abhishek Bhandari — Analyst
Samarth Pachchigar — Analyst
Sandeep Shah — Analyst
Mihir Vyas — Analyst
Onkar Ghugardare — Analyst
Mansimar Singh — Analyst
Dhruv Agarwal — Analyst
Saket Binani — Analyst
Hasmukh Devji Visaria — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Netweb Technologies Q2 FY ’25 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Hardik Rawat from IIFL Securities Limited. Thank you, and over to you, sir.
Hardik Rawat — Analyst
Good afternoon, everyone. On behalf of IIFL Securities, I welcome everyone to Netweb Technologies 2Q FY ’25 earnings call.
We have the pleasure of having with us the senior management team of Netweb Technologies led by CMD, Mr. Sanjay Lodha; CFO and Chief Human Resource Officer, Mr. Prawal Jain; Whole-Time Director, Mr. Navin Lodha; Chief Sales and Marketing Officer, Mr. Hirdey Vikram; and Head of Uirtus Advisors, the IR advising firm to Netweb Technologies, Mr. Sanjeev Sancheti.
Without further delay, I’d like to hand over the floor now to Mr. Sanjeev Sancheti. Over to you, sir.
Sanjeev Sancheti — IR Advisor
Thank you, Hardik. Good afternoon to all the participants.
Before I hand over the call to Mr. Sanjay Lodha for the opening remarks, I would like to draw your attention to the safe harbor statement in the earnings presentation. I request each one of you to go through the presentation either now or before the Q&A starts so that you are aware of the same.
Thank you, and over to you, Mr. Lodha.
Sanjay Lodha — Chairman & Managing Director
Thank you, Hardik and Sanjeev. Good afternoon, and a very warm welcome to all of you to the Netweb Technologies Q2 financial year ’25 earnings webinar.
I will take you through the business and operational highlights of this quarter gone by, while our CFO Mr. Prawal Jain will share the financial metrics. We are delighted to report that we have had a strong quarter and a half year as our operating revenue for H1 grew by 96% year-on-year, crossing INR4,000 million, while H1 financial year ’25 PAT doubled year-on-year to INR412 million. As you must be aware, earlier this year in May, we had commissioned India’s flagship state of art end to end high end computing server storage and switch manufacturing facility, marking a significant milestone in the Make in India initiative. This new facility has enhanced our manufacturing capabilities for cutting edge computing system, encompassing the entire production process including PCB design, manufacturing and SMT for high end servers, storage, switches demonstrating advanced manufacturing skills. In August, we further expanded our offerings by launching 8 models of advanced server systems powered by latest AMD Genoa processors, continuing our commitment to the cutting edge technology.
India is rapidly emerging as a key player in AI adoption, with businesses increasingly leveraging AI to field innovation and streamline operations. In this rapidly evolving technological landscape, AI is driving transformation across various sectors in India, including health care, research and education, agriculture, sustainability, urban mobility, financial services, manufacturing and retail. With India’s AI research ecosystem release and through government initiative and industry partnership, the potential for innovation and growth is immense. Netweb is well posed to harness these opportunities. Our strategic focus on the three pillars, HPC, private cloud and AI keeps us at the forefront of technological evolution.
AI has rapidly become a pivotal contributor to our revenue, growing its share to 15% in H1 financial year ’25 with a remarkable 193% year-on-year increase. Fueled by innovation, this strong growth highlights AI role as cornerstone of our business strategy and our future growth. And this week we’ll be participating in the India AI Summit where Nvidia, our technology partner, and its ecosystem of customer partners will showcase transformative AI innovations. The event features over 50 sessions and live demos on generative AI, large language models, supercomputing, robotics and more.
Our business pipeline and order book remains strong. We are pleased to report that we have started receiving export orders and this aligns with our growth strategy to enter overseas market. Continuous improvements in our capabilities, along with expansion of our operations and product range position us well for ongoing growth while maintaining our technological leadership.
I would like to hand over the call to Prawal to provide you financial — to updates on financial numbers. Thank you.
Prawal Jain — Chief Financial Officer & Chief Human Resource Officer
Thank you, Mr. Lodha. Good afternoon, ladies and gentlemen. Thank you for joining the earnings webinar.
I will give you a brief overview of the financial numbers for the quarter before we open for Q&A. I hope everyone would have got a chance to look at the earnings presentation and the press release by now. While our CMD has already covered the macro outlook, I will try to explain in a more granular manner the financial performance of the quarter and the year gone by.
Our operating income increased by 73.2% year-on-year on quarterly basis, reaching INR2,511 million in Q2 financial year ’25 and increased by 95.5% over the half year, recording INR4,004 million in H1 financial year ’25. Our operating EBITDA for Q2 financial year ’25 increased by 85.7% year-on-year reaching INR357 million, while for H1 financial year ’25, it increased by 100.6% year-on-year, reaching INR559.1 million. The operating EBITDA margins for Q2 financial year ’25 was 14.2% and for H1 financial year ’25, it stood at 14%. Profit after tax for Q2 financial year ’25 grew by 69.8% year-on-year, reaching INR257 million. For H1 financial year ’25, PAT increased by 103.4%, reaching INR412 million. PAT margin stood at 10.2% in Q2 financial year ’25 and 10.1% in H1 financial year ’25.
Return on equity for the Q2 financial year ’25 was 18.7% while return on capital employed during the same period was 25.2%. Net debt for the quarter was at INR664 negative million in Q2 financial year ’25 as compared to negative INR330 million in Q1 financial year ’25. Kindly note that this net debt calculation excludes unutilized proceeds from the IPO. Cash conversion cycle for Q2 financial year ’25 improved to 100 days as compared to 129 days in Q1 financial year ’25.
We continue to prioritize our strategic objectives and growth pillars with a strong focus on our long-term goal of sustainable growth and profitability. With our strong quarterly and half yearly performance backed by a healthy order book and business pipeline, we remain confident in delivering substantial revenue and profit growth for the financial year.
With this now I hand over the call to Hardik Rawat. Thank you.
Hardik Rawat — Analyst
Thank you. We can now proceed to the Q&A session.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Yash from Stallion Asset. Please go ahead, sir.
Yash Gandhi
Hi, thank you for the opportunity, and congratulations for the excellent set of numbers. So I just wanted to understand that for the last four quarters, our pipeline has not substantially increased. It’s been ranging about from INR3,200 crores to INR3,700 crores. So I just wanted to get your view on what would be the growth in pipeline for the next two years?
Prawal Jain
Actually, the pipeline basically has been increasing, plus, basically pipeline is a very, very gradual and a kind of a thing which is on daily basis, it is improving and it basically get it consumed and rollover is happening. You will also have to consider we are a company which is growing at a rate of 35% to 40% CAGR. Okay, so basically pipeline is getting converted into orders, into L1s and all those kind of areas. So we are seeing a healthy growth in the pipeline. And basically, that pipeline gives me a very robust confidence that basically that will keep me growing for at least for the next two to three years. So I think, and as I mentioned to you, a pipeline time is somewhere around closer pipeline time is that ranges around 6 months to 18 months, actually. And hit rate is somewhere around 60%, approximately. So I think there is healthy growth in the pipeline and that will keep on growing.
Yash Gandhi
Right. Because — sorry to just pasture a little bit more on this. But so based on the pipeline, at least I can assume that whatever revenues you earned in H1, basically in H2, it’ll be about like two-third of it. So basically, one-third revenue in H1 and two-third revenues in H2. Would be understanding the right?
Prawal Jain
Actually, our business cannot be judged on quarter-to-quarter basis. Whatever we have been guiding approximately around 35% growth, we will be maintaining that actually year-on-year, basically, which we have been guided, we like to maintain that.
Yash Gandhi
Okay. Got it. Thank you.
Operator
The next question is from the line of Rohit from Nvest Analytics Advisory LLP. Please go ahead, sir.
Rohit
Hi, am I audible?
Operator
Yes, sir. Please go ahead.
Rohit
Good afternoon, and congrats for a good set of numbers. Just one question on the order book. Like, what is the expected order intake for the company in the second half of FY ’25 that is anticipated to contribute to revenue in FY ’26?
Prawal Jain
Can you come with your question again? Your voice, basically at the end got clear.
Rohit
I’m asking on the kind of order intake you people are expecting in second half, sir.
Prawal Jain
Yeah. So basically, the order which I mentioned to you, I maintain the same line that it will be remaining. Our current order book is somewhere around INR360 crores. But basically, our kind of a company cannot be basically judged on the tune of the order book because our order book lasts from 12 to 16 weeks or at the most 20 weeks, actually. So basically the orders get build up and they are executed. So basically, the pipeline gives us the confidence that it will go on. So I will still maintain the same thing. The growth which I have mentioned to you, 30%, 35% growth, we will be definitely maintaining that. And the order book and everything will be in that tune.
Rohit
Okay. That’s it from my side. Thank you, and all the best for the future.
Operator
Thank you very much. The next question is from the line of Akshay from CD Integrated Services Limited. Please go ahead, sir.
Akshay
Hello? Am I audible?
Prawal Jain
Yes.
Akshay
I just want to ask that in our management commentary, we have said that we are getting the export orders, and we will focus firstly on Europe and Middle East market. So can you put some light on margin front end to reach as to what will be the difference between rising over there versus in India?
Prawal Jain
Actually, as I mentioned to you, we have been mentioning that we will slowly be growing our business and we will be starting exporting. So it has just started actually at this point of time. And that is in line with the same situation as I mentioned to you, Middle Eastern European markets the same way we are trying to do it. And the margins profile will be almost or very similar because basically all our customers are enterprise customers. They can be marginally slightly more margin from the export orders, but primarily overall, if you see it will remain almost all similar because basically the customers are enterprise customers and plus we want to penetrate deeper and to increase their confidence. So definitely margins, you can take it. Margins would be almost all on the similar lines.
Akshay
Okay. And second question is that we have earlier said that we were facing the challenges because IPO in getting the good talent, so now we have, after the IPO, our reach has been increased and we have got good talent. So on the current employee base and all the things, so can we say that over the next 5 to 10 years we will healthily grow in this — at this type of this employee number?
Prawal Jain
Can you repeat your question again? So we are not able to understand as your voice is not very clear. Can you just repeat it and be little slow in asking?
Akshay
Yes. Hello. Yes, sir. Am I audible?
Prawal Jain
Yes, now it is better.
Akshay
Yes. I was mentioning about our current employee base. So whatever we have currently, our talent right now, can we grow for the next 5 to 10 years at a very healthy growth rate on our current employee base or we will face challenge in terms of getting the talent, good talents on the market?
Prawal Jain
Our current employee base is around 421 currently, after going public, we are not facing any talent crunch. And for the next two, three years, we will continue growing in the same way we are growing. And there will be no talent crunch.
Sanjay Lodha
And actually we are getting a lot of good talent now. While we went for an IPO, we were around 240 people. You can say we are almost all basically more than almost all double of the numbers what we have here actually. We are on 421, as Prawal-ji mentioned. So basically we are getting very good talent. And so that is the reason we are also employing only good talent now. We are also basically choosy in hiring people. So there is no breadth of talent. We are getting talent. We are getting lot of traction around it and that’s very healthy for the company.
Akshay
Okay. Thank you for answering my questions.
Operator
Thank you very much. The next question is from the line of Chirag Khasgiwala from Neo Asset Management. Please go ahead, sir.
Prawal Jain
Yeah. Please.
Sanjay Lodha
We cannot hear you.
Operator
Mr. Chirag?
Chirag Khasgiwala
Can you hear me?
Prawal Jain
No, we can’t.
Sanjay Lodha
Your voice is very slow. Can you speak little louder?
Prawal Jain
You are looking feeble. We can move to the next question. He can come back to the queue. Hello, moderator, can you move him back to the queue and take the next question, please?
Operator
Yes, sir. Mr. Chirag, can you say something again? Okay, since there is no response from Mr. Chirag, we will move on to the next question. The next question is from the line of Abhishek Bhandari from Nomura. Please go ahead, sir.
Abhishek Bhandari
Thank you for the opportunity, sir. I had two questions. First is if you could explain the big trends in the revenues from other enterprises in this quarter. The other businesses seem to be quite stable, that would be a question, but other enterprises had a big jump.
Prawal Jain
Yes, so basically as — thank you for your question actually. So as basically we have mentioned that quarter-to-quarter things basically are different actually because our business cannot be judged in terms of quarter because these are all enterprise grade customers which we deal with. So like last quarter, we had the government was slightly higher. But this quarter, we are seeing a lot of traction on the enterprise side from the other enterprise.
Sanjay Lodha
Yeah. So basically some new segments were added this year, basically this quarter actually. So I think that’s the reason you are seeing that entertainment.
Prawal Jain
Entertainment and media was a new segment which was added during this quarter. So you are seeing a jump in other enterprise revenue for the this Q1. So it will be better if all year segment division is seen quarter-to-quarter, it might give you an abrasion.
Abhishek Bhandari
No problem. Thank you for that answer. And does it also coincide with your private cloud and HCI vertical from this?
Prawal Jain
Yes. True. So that reason private cloud and HCI is also on the higher side.
Abhishek Bhandari
Got it. The second thing is on this government’s proposed ordering for this AI mission in India. If you could update what the status the new government has come in? Are you seeing any movement on that?
Prawal Jain
Yeah. There is a — I think I will let Hirdey answer that.
Hirdey Vikram
So. Hi Abhishek, thanks for your question. So yes, I mean India AI mission is progressing already. As you can see that their first trends in the form of RFP is already out and that is also going to get closed very soon. And afterwards it is expected that they will be rolling out the major RFP as well. So this is completely on track as we had expected. And we are completely geared up to participate. So we have our strategy intact, which will help us to ultimately be competent and take part in the RFP.
Yeah. I hope you got to know that we have introduced our two generation of systems which will be ultimately very effective in taking part in India AI mission. So one is that we have introduced our Arm architecture based GPU systems along with Nvidia, and we became one of the businesses in the world to introduce domestically manufactured Grace architecture, which is also the Arm architecture based GPU systems, that is one. And second is that we have introduced AMD based systems also, wherein we are having a complete range of GPU systems based on AMD architecture.
So with these two advancements, we are pretty much — we are very well placed to compete in this India AI mission. And what they demand and what they require for the OEMs to offer is something which is available with us now. And the best part is that not just limited to hardware, we have the complete cloud stack on top of it, and the complete middleware stack also, which is available. So helping us to offer the complete AI sovereign cloud offering. So yes, we are completely in line, and government’s progress is also something exactly what we had expected from them.
Abhishek Bhandari
Got it. Thank you. And my last question is on your cash flow situation.
Hirdey Vikram
Yeah. I’ll let Prawal-ji answer this question.
Abhishek Bhandari
So my question is, could you talk about your long-term targets in terms of your cash conversion cycle? That will be helpful.
Prawal Jain
Look, cash conversion cycle, seeing the growth we are undergoing, so cash conversion cycle will be in the range of 100 days only for us. Okay, so at a point, or you can say at 31st March, it improves a bit, but if you will see quarter-on-quarter, it will be in the range of 90 to 100 days.
Sanjay Lodha
Largely. It is in that range only. So I don’t foresee any much improvement in this working capital cycle days, because the kind of industry we belong to, I think that’s the kind of cycle which we expect, because the customers also basically all enterprise get customers the kind of payment cycle we have with them that matches with that.
Abhishek Bhandari
Got it. So maybe if I can ask a follow on, is there any difference in the profile of cash conversion cycles across your different client types? Intuitively, customers from government should be a longer working capital.
Prawal Jain
No, the reverse actually. It’s just the reverse. Government is better than the industry. We have working — we have a credit period of around 90 days from both government and non-government enterprise customers. As far as our observation is that government enterprises are more prompt in paying us.
Sanjay Lodha
So really speaking, both the enterprise and the government, the private and the government sectors are more resistant underlying credit terms and NT days. So by and large, you see 90 to 110 days is a range by which is your cash conversion cycle, because the inventory and the payables played out so if you look at our cash flow cycle, the inventory turnover day and the payable days are almost the same. Inventory is technically funded by the payables. And what you see in cash conversion cycle is basically the debtors, which will be between 90 to 110 days even as you go forward. That’s the nature of the business.
Abhishek Bhandari
Perfect. Thank you and all the best.
Prawal Jain
Thank you.
Operator
Thank you very much. The next question is from the line of Hardik Rawat. Please go ahead, sir. Hello, Mr. Hardik?
Hardik Rawat
Yeah. Can you hear me?
Operator
Yes, please go ahead.
Hardik Rawat
Thanks for the opportunity and congratulations on another set of strong results. Starting with revenue, wanted to understand exactly, we’ve seen some very strong growth in the HCI segment. So were these private cloud installations, has this coincided with your improved execution for the entertainment and media client? So largely private cloud is what was supplied to the new set of clients under the other enterprises category?
Prawal Jain
Yes. If you see there has been a growth all around actually, but private cloud has really gone up. And if you see my total revenue split between government and enterprises, also higher this time, enterprise is higher than the government. So basically that has happened. Media, entertainment, there was one customer, one or two customers, which basically you saw that segment growth, but otherwise that you know the data center boom is happening. In India, what is happening is that at current point of time, the data center is really in a huge demand. So definitely data center in turn goes back and falls back upon the private cloud and HCI only. So definitely that is indicative in our figures and that is shown to there.
Hardik Rawat
So what was the share of government in the overall revenue this quarter?
Prawal Jain
I think 40%, if I’m not wrong, 40%, 60%. 40% was government 60% for private enterprise.
Hardik Rawat
Yeah. 40%, 60 in 2Q FY ’25.
Prawal Jain
Yeah.
Hardik Rawat
Okay. Another thing is, can you tell us about some major projects that you’ll be executing, especially in your HPC segment in the next two quarters? I’m assuming that this ISRO project is executed sometime in second half.
Prawal Jain
Yeah. Actually it’s expected to be done that. But basically, we will not like to go into specific orders. Actually Hardik, I really appreciate.
Hardik Rawat
All right, no worries. Another thing was with regards to the export orders that you mentioned. Could you shed some light on the geographies and the specific segments in which we are starting to receive some traction in terms of orders?
Prawal Jain
The private cloud and HCI is one of the segments on which we are receiving this traction. And AI also and privately, it is going as per the target only primarily targeted towards the Middle East and European countries.
Hardik Rawat
Okay. And any status update on the 5G ORAN solutions?
Prawal Jain
Yeah, so that is under development. Actually that is still in the development basically the government, the private 5G part. I think it will take some more time still with our R&D team. Our R&D team has become very strong now. We have R&D team of around 100 people, around 74 people. We have in the software R&D, around 22 people in the hardware R&D. So that used to be 53 when we went for IPO, but now it’s around 100 people, very strong R&D team. And plus basically we are working on several things and 5G ORAN is also one of the things on which we are working at this point of time. Okay. Another thing was, with regards to the EBITDA margins, we expected that with the operationalization of the new facility, EBITDA margins could have been lower, but they were very strong at 14.2%. So just wanted to understand, firstly, what are the utilization levels at our new SMT facility? And secondly, is the higher EBITDA margins a result of better mix of the AI and enterprise vertical in our sales mix?
Sanjay Lodha
Yeah. Hardik, we don’t measure ourselves on the capacity utilization that we have been repeating every quarter, rather we judge ourselves on the capabilities. So your question on capacity utilization, it is difficult to answer right now.
Prawal Jain
But if you want to understand whether the new plant is fully functional or not, the new plant is fully functional and fully rolling out.
Sanjay Lodha
Coming on the EBITDA margins, definitely the AI segment has little bit improved margins as compared to other two segments. So you are seeing, therefore, the EBITDA margins on a higher side this quarter.
Prawal Jain
Also, Hardik, one thing you should appreciate that there are orders, some of the orders which are large orders. So it is not necessary that every time you will see the same margin, we will be in that range of around 14% — around 15% because some orders may come at LTM margin, some may come at a little lower-margin. So I mean, it’s not a magic thing that it will be stuck at a point. But around 14 plus, that’s the range which will be indicative margins.
Hardik Rawat
So 14% to 14.5% is the range where the EBITDA margins for FY ’25 should lie. Is that your correct understanding?
Prawal Jain
Correct.
Hardik Rawat
I’ll get back in the queue. Thank you so much for answering the questions.
Operator
Thank you very much. The next question is from the line of Chirag Khasgiwala from Neo Asset Management. Please go ahead, sir.
Chirag Khasgiwala
Yeah. Hi, am I audible now?
Prawal Jain
Yes, Chirag, very well audible now.
Chirag Khasgiwala
So just wanted to know that if I — when I go to your cash flow statement, your operating cash flow has gone negative to INR80 crores in this quarter. So I mean, would this situation be sustainable because it looks like you are getting good profit growth, but you are actually funding cash and not able to generate cash?
Prawal Jain
Your voice is a little bit feeble, but I have understood your question. So you will see that cash actually before the working capital changes our cash from operations are on the positive side. So the only factor that is resulting in our net working cash flow from operations to a negative is the increasing debtor. So this is the problem of our growth. So as our operations will continue to grow at the same pace, so this negative cash flow you will see will be there.
Sanjay Lodha
So let me explain that. So the cash conversion cycle, the way it is work is, fortunately, we are growing at a very rapid pace. So if you look at the Y-o-Y growth of 70%, even the Q-on-Q growth is very strong. This is not a business which is a cash-and-carry business, right? This is a business which will always have a 90 to 100-day debtor. Now when you’re growing so fast your previous quarter revenue, the entire of it is outstanding. That’s why you’re seeing this. But what is more important to understand is the quality of assets, the quality of debtors, the quality of inventory, both are top class, absolutely no impairment in these assets. So they will get converted as the growth smoothens, you will start see the cash flow getting into the business very, very strongly. This is the typical cycle when the growth is high, you are getting reinvested into your next quarter growth. That’s the reason you are seeing this.
Chirag Khasgiwala
Okay. And secondly, if you see recently it was the promoter stake sales that happened. So what was the rationale for that? And do you expect any more stake sales to come through?
Sanjay Lodha
So I think there was no planned or promoter stake dilution, we had some very good investors who were looking at the larger positioning and of course, we have just given about 3.6%. We do not foresee any further dilution both either primary or secondary…
Chirag Khasgiwala
Hello?
Sanjay Lodha
And secondary also, we do not foresee any dilution in the near-future, yeah.
Chirag Khasgiwala
And lastly, how much contribution can you expect from AI business going forward, would 15% be the peak level or it could go even higher?
Sanjay Lodha
No, it is not the peak, but for FY ’25, our guidance is 15%.
Chirag Khasgiwala
In the next three quarters?
Sanjay Lodha
If we go forward in the next two, three years.
Chirag Khasgiwala
Thank you.
Operator
Thank you very much. The next question is from the line of Samarth Pachchigar from Krijuna Research and Analytics. Please go ahead, sir.
Samarth Pachchigar
Thank you for the opportunity. I just have a question that this time we had a 2% revenue share from the cluster management software that we offer to our clients. So does management see to scale it up? Hello?
Prawal Jain
Software and services basically, primarily, it’s not a focused business for us. We are not a services company at all. But basically what happens is that we do some, we offered only very, very specialized kind of services. So basically that is there. So that segment will remain around that 2% to 3% only. We are not a software or a services focused company that is basically on, we only provide it like basically particularly for oil and gas or for some specific kind of geological research or some specific kind of DFSI clouds or something of that nature. So those services are limited to that. So this segment will remain in the same range what it is at this point of time. Our three pillars will be supercomputing, private cloud and AI. These will be the three pillars of my business as it is — it might be evident to you from the presentation also.
Samarth Pachchigar
Okay. Yeah. Thank you so much.
Operator
Thank you very much. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead, sir.
Sandeep Shah
Yeah. Thanks for the opportunity, and congrats on a strong quarter. Just on the government AI mission, the press articles implies that the turnover threshold is now being lowered and many companies are eligible in terms of bidding. So are you worried this may lead to many competition and this may dilute the margins? And are we in a major RFP stage we will participate or in the initial phase of smaller RFPs we will also participate?
Sanjay Lodha
So Sandeep, thanks for the question. Actually if you have read it, so this is basically for the RFE part only, which is only for the empanelment for services. And ultimately this criteria is applicable only for the bidders. We are not intending to bid directly, and we will be partnering with the bidders who will be CSPs who will be interested to participate in this. So as such, this criteria does not apply to us. In fact, this is only helping us to reach out to more CSPs and this is ultimately going to help us grow our business in a bigger way. So I would say this is a welcome move. And as regards the next trends is concerned that is also underway. As I mentioned that the RFP for the bigger part is also on the way and as expected, I mean government is progressing quite well on that front also. So I mean this is exactly in line. I don’t see any challenge with that.
Sandeep Shah
Okay. So just a follow up in terms of deal pipeline, does this would be forming our part of the deal pipeline starting FY ’26 or it may start from Q3, Q4 of this financial year itself?
Sanjay Lodha
So we have not factored in this part into our pipeline as yet. So we may start adding up to our existing pipeline maybe by next fiscal year. So that is what you can expect from us.
Sandeep Shah
Okay. And in terms of the pipeline, is there any mega orders like ISRO orders in the pipeline or there are combination of medium to smaller size of pipeline?
Sanjay Lodha
Pipeline we cannot reveal customer wise. You’ll appreciate Sandeep, this will be…
Sandeep Shah
I’m not asking customer wise, I am asking on average size. Is there any mega dealings with the pipeline?
Sanjay Lodha
It’s all kind, all kind of orders, Sandeep-ji. Basically it’s all kind of orders pipeline. Basically pipeline is a very, you can understand that the INR3,700 crore pipeline. So it is basically a mix of all kind of things actually. But they very categorically mentioned that AI mission is still not part of the pipeline. So basically we also just don’t add the pipeline. Actually, somebody asked in the question earlier that basically why our pipeline is not growing. So we only add up or add into the pipeline one that gets qualified once. Basically the first level of discussions are happening once. Basically we feel that it is almost all ready to go, then only we add them into the pipeline. We just don’t add things on the pipeline.
Sandeep Shah
Okay. And just a clarification in observation of the four quarters which we reported for FY ’24, the order book has a seasonal strength in Q3, Q4 versus Q1, Q2. So does that seasonality may be true even in FY ’25 where H2 order book could be better than H1 order book?
Sanjay Lodha
Sandeep, I still maintain that I will grow at the same rate of 35%. I assure you this is the 6th conference call I am having after listing. We have shown you growth all along. So please have confidence in us. We have shown you growth. We will show you growth in future also.
Sandeep Shah
Okay. And last question, Prawal-ji, for you. Considering the PLI which we may apply in the second half, there would be a margin tailwind either in Q3 and Q4 to that extent.
Prawal Jain
The quarter in which PLI will come, there might be slight improvement, but overall for the whole year, the margin profile will remain the same range for that quarter, slight increase will be there.
Sandeep Shah
Okay. Thank you, and all the best.
Sanjay Lodha
The PLI, it is — obviously the PLI is not going to materially change the margins. You know that. Sandeep.
Sandeep Shah
What? Sanjay sir, can you repeat?
Sanjay Lodha
PLI [Foreign Speech] And we don’t factor engineering in advance, as you know.
Sandeep Shah
Okay, thank you.
Sanjay Lodha
Thank you.
Operator
Thank you, sir. The next question is from the line of Mihir Vyas from 9 Rays EquiResearch. Please go ahead, sir.
Mihir Vyas
Hi, thanks for the opportunity. I just had one question on the data center side of the business. Can you help me understand how this side of the business shall grow in future since there’s a lot of fraction in the field of data centers? And since we have now started exporting also, is there any, some constructive talks in that area or any revenue potential or this revenue share of this sector can grow — segment can grow, sorry?
Prawal Jain
So hi, thanks for question. So definitely, answering your question, that whether we see the progress in the data center space or not you have already been saying that we have mentioned about three large pillars in our case. One is supercomputing business, second is private cloud and HCI. So definitely private cloud and HCI is something which is targeting towards data center vertical of the market. And as you can see, the kind of momentum country is already seeing towards data center vertical. So that definitely gives enough confidence that there is no slowdown anytime seeing shortly in coming time. So obviously, we have got full roadmap for the data center market, and we already have decent product line to cater to this market. So we have got the product line, we have got the market in front of us. So we will not leave any stone unturned to tap into this market more heavily. I hope I answered your question.
Operator
Yes. Thank you very much. The next question is from the line of Yash from Stallion Asset. Please go ahead, sir.
Yash Gandhi
Hi again, thank you for the opportunity. Sort of hard on the guidance again, because I remember in the Q1 call, I think we had said that H1 is about one-third in terms of revenue and H2 is about two-third revenue. Now I mean, obviously, if it needs to be that heavy, then broadly your revenue, which is no more than your guidance of 35%, just from my understanding, just for more clarity, do you sort of now fold a that H2 is basically, in terms of percentage wise, you would so like maybe it’s like 60-40?
Prawal Jain
So I just want to kind of clarify that we shouldn’t be trying to cherry pick guidance. Our hard guidance is on the growth of revenue, which we are underwriting to 35%. We have always outperformed that we would endeavor to outperform that. If possible, yes, two-third is the standard thing. But sometimes if a quarter is very strong, a little bit of overflow happens, et cetera, that is normal. So I mean, probably 40-60 here and there. Yeah. But we cannot one-third, two-third is a general trend which has seen. In this year, if you see the first half has been particularly good, especially the second quarter. So it will have a reverse negative spillover impact, possibly in the coming quarters. Yeah. But we are committed to a 35% minimum kind of a growth as we have committed. And by and large it will be around that end. But it can be plus and minus 5%, 7% in terms of the split between H1 and H2.
Yash Gandhi
Got it. Thank you.
Operator
Thank you very much. The next question is from the line of Onkar Ghugardare from Shree Investments. Please go ahead, sir.
Onkar Ghugardare
Hello, congratulations on good set of numbers, once again. I have a couple of questions actually. Just wanted to know bit more about your company and this sector. So first of all, how big is the size of opportunity in your type of business?
Prawal Jain
I think most of the people here on the call are well aware. We can do a separate call, because this will be long.
Onkar Ghugardare
Okay. I’ll ask more specific question about — specifically about the result then.
Prawal Jain
Yeah.
Onkar Ghugardare
So my question is regarding what kind of return on equity and return on capital employed you are targeting since you will be growing faster in the two, three years?
Prawal Jain
Our guidance is on the broad margin range and the top line. I think the rest a little bit of analytical, you guys will also have to do.
Onkar Ghugardare
Okay.
Prawal Jain
You’ve seen our ROEs have been pretty strong. We have been in the range of ROE is 18% plus. If you look at it, if you look at the full year ROE has been very strong. So I’m sure that as long as we continue to grow at the pace that we have guided and in the range of the margins that we have guided, I don’t think ROA, ROCE should be a concern.
Onkar Ghugardare
Okay, thanks. Next question is on the AI mission, which you talked about. How big it could be according to you, and how the PLI could be?
Sanjay Lodha
So basically, India emission, anyways, this is something which is known to the entire world now because government has already announced about it. It’s not about just we saying about it. So India AI mission as such is basically a project, which is sizing around more than $1 billion kind of budget they have allocated. And that is also targeted to be spent within a span of 3 to 5 years. And they can be an acceleration to spend that money by government. So this is the size of opportunity. And as we have already explained that we are well poised and well placed for this opportunity. So we are targeting by our newly introduced product line for this. So yeah, this is the situation.
Onkar Ghugardare
You mentioned $1 billion, right?
Sanjay Lodha
Yes. It has already been said that more than $1 billion is something what has been allocated by the government as of now. And they have planned to spend the same over a period of 3 to 5 years.
Onkar Ghugardare
Okay. Like, can you talk more about how and who could be your competitors in getting the orders from the government? I mean, how many competitors are there?
Prawal Jain
This is a very, very different kind of a question, actually, really speaking, because there are a lot of dynamics to it, and this is a government policy question. So we not like to basically discuss that on a call.
Onkar Ghugardare
Yeah. But just if you can give a sense, like how many competitors are there and what kind of competitors you have?
Sanjay Lodha
The RFP has not yet come. Okay. The government is still the designing structure is going on wherein basically, Nvidia is a leader in the computing side. Okay. There are other players also. There is a new AI chip which is being developed almost all, every day. Today, basically today there is a company called Cerebras. They are also trying to come up. They fortunately, unfortunately, if Cerebras comes with a product, they can also be basically, they can also come into competition. So that’s the situation, actually. Whereas basically, we are aligned with most of these partners. We are there. But whoever the competition will be, they will be all MNC competition. We don’t target. We don’t foresee any domestic competition as such. I hope I am able to answer your question.
Onkar Ghugardare
Yes. Just a clarification on that. When can we hear this from the government, as per your knowledge?
Sanjay Lodha
Yeah. So basically, the government is very actively working on this. There is an AI summit which is happening starting from this week only. So basically, I think government is in a rush. And the first part of it, as Sandeep answered — Sandeep asked us a question actually. The first part on the services part, the RFP is already rolled out. And basically, the new RFP, the preparation is going on. As far as I personally feel is that it should be out by Q2 next year.
Onkar Ghugardare
Okay. Q2 next year. Okay. All right. Thank you.
Operator
Thank you very much. The next question is from the line of Mansimar Singh, who is an Individual Investor. Please go ahead, sir.
Mansimar Singh
Hello?
Operator
Yes sir, you’re audible. Please go ahead.
Mansimar Singh
Okay. First of all, Sanjay sir, really congratulations for wonderful result. As you guided in earlier con calls, you are in line with the revenue guidance. I just wanted to know regarding our pipeline, where we are — in the order book, we have mentioned INR369 crores of order book and INR331 crores of L1. So L1 will be getting the projects as and when the bids will be getting. Can you tell me what percentage of this L1 and order book will be consumed in H2, the next two quarters?
Prawal Jain
Basically, as order book is concerned, I can tell you order books should be completely consumed in H2. No doubt about that. As regards L1 is concerned, I can tell you it should be around maybe 50% to 60% should get consumed without any problem. But these are all dynamic things. Every day the order books keeps on adding. Every day the L1 condition also keeps on adding.
Mansimar Singh
Okay, thank you. And one more question regarding we have launched our Make in India Tyrone AMD servers and HCI. So can you tell me like what will be the share of our data centers, which includes a segment of HCI and cloud by like two, three years respect to our revenue?
Prawal Jain
Because basically what happens is that we don’t target everything, actually we target only the enterprise customers because as I’ve been telling you again and again, we don’t target the SMB and the small market which are again using lot of HCI. But primarily our target is large enterprise customers. And we feel we will definitely have a good footprint in that. And as you are seeing this quarter, also the growth, the maximum growth came into the private cloud and HCI. So definitely that will keep on going. And our partnership with AMD is only making us stronger because basically this is on latest chipset, we have a complete stack of basically because AMD processors are again basically outperforming in some kind of situation. So we are able to leverage that and with make any expertise, the kind of things which we are generating that is making our product range more stronger so our penetration will increase further.
Mansimar Singh
Okay, thank you. And one last question. Respect to we have received the order of JNU HPC cluster, right. So can you tell me like by when this project will be completed?
Prawal Jain
JNU HPC cluster? I did not declare anywhere.
Mansimar Singh
It is there and I think it was there in the Twitter I’ve seen this.
Prawal Jain
That is basically, I don’t answer Twitter questions, actually, please, because I cannot speak about specific orders. We have NDAs with customers and all that. So I am sorry about that.
Mansimar Singh
Okay, no issues. Thank you.
Operator
Thank you very much. The next question is from the line of Dhruv Agarwal from Niveshaay. Please go ahead, sir.
Dhruv Agarwal
Yeah. Is it audible, ma’am?
Operator
Yes, sir, you’re audible. Please go ahead.
Dhruv Agarwal
Yeah. Congratulations on the very good set of numbers. I have two questions. Firstly, on the $1 billion PLI scheme that you had said, you don’t see any domestic competition on that side. But you said that you have — you may see the competition from Nvidia, and furthermore, you said some names, but it was not properly audible. So can you just spell it out?
Sanjay Lodha
Basically, you’re completely confused. I’m sorry to say that. We never mentioned there is $1 billion PLI. First thing is that. Okay. Basically, what Hirdey mentioned is basically AI mission total outlay. If you see the cabinet note which has been present to the parliament that says that, that basically $1 billion is the total AI mission outlay. Actually, it’s not a PLI. First thing is that. And Nvidia is a partner to us. Nvidia is not a competition. I never mentioned Nvidia as a competition actually. What I wanted to mention is that basically, once you are asking about suppression, then there are newer technologies which are coming up. There may be many newer technologies which are coming up. So they may come and basically the distribution and things can get distributed that way. So that was my point. But Nvidia is a leader. And I have got no doubt for future years, Nvidia will remain the leader.
Dhruv Agarwal
Okay. And the second question would be, in terms of GPU, that you are kind of there in the business. So in terms of quality, how good we are in comparison to Nvidia or something like that?
Sanjay Lodha
We are using Nvidia. We are not in comparison with Nvidia again, I am again mentioning to you we are partners with Nvidia. If you see the press release, even the Nvidia, the Nvidia top senior people have mentioned that Netweb is the OEM partner for them, which they have mentioned. It’s very clear. So we are not a competition to Nvidia at all. And as far as quality is concerned, we are a certified partner and OEM partner for Nvidia. So Nvidia does all the qualifications, then only qualifies a partner to that level. So and you see all the — we are selling it. Our market is we are, our 15% of revenue is coming from AI systems, that itself says that. We also got an award from Nvidia for being the largest partner last year. So basically I think that speaks about it. So quality and all is not a concern for us.
Dhruv Agarwal
Okay. Thank you so much. I’m sorry for misunderstanding that.
Sanjay Lodha
No problem. Thank you.
Operator
Thank you very much. The next question is from the line of Saket Binani, who is an Individual Investor. Please go ahead, sir.
Saket Binani
Good afternoon. Congrats, Sanjay and Prawal, for excellent set of numbers. So my first question is considering the significant expansion of your employee base from 250 to 400 since the IPO. So how confident is management in sustaining this growth rate without encountering talent acquisition challenges or skill gap?
Sanjay Lodha
So talent acquisition, I think we’ve already answered that. Post the IPO, we have no depth of attracting talent. We have been able to hire the people we have wanting to hire, and we’ll continue to do so. As far as growth is concerned, we have very clearly guided that we grow around 35% over the next three to four years. We stand by the guidance. Unless we change the guidance, it continues to be the same.
Saket Binani
Sure. And another thing related to the employment has incremental employment since IPO led to higher than expected labor cost by any chance?
Prawal Jain
Expenses have gone up, the revenue has gone up, the expenses have gone up and it is expected to go up actually. And plus basically you need to pick good people if you want to hire them. But basically that is completely, you see where our margin percentage has not dropped. That is the same actually. So we are able to — the company can afford it and company can definitely have better talent. We also wish to pay our people more so that basically they remain with the industry standards.
Sanjay Lodha
And we can able to retain the best talent. Also we have to make our organization future ready, so we’ll obviously keep hiring best talent.
Saket Binani
Sure. That are my questions. Best of luck for future. Thank you.
Prawal Jain
Thank you.
Operator
Thank you very much. The next question is from the line of Hasmukh Devji Visaria from Tata Mutual Fund. Please go ahead, sir.
Hasmukh Devji Visaria
Yeah. Hi, thanks for the opportunity and congratulations on consistent delivery. I just had one basic clarification in terms of AI mission, right. So you talked about you will be a partner to any of the — let’s say global OEMs and not directly, let’s say subscribe to the RFPs. Did I hear that right? And if yes, then what’s the reason behind this?
Sanjay Lodha
I’ll clarify it to you again. So basically what we said, that the first part of it which has come out that is about which is just a small portion of the entire the opportunity. This has come out in the form of empanelment for services, okay, for empanelment of services, they are inviting CSPs to get themselves empaneled. And for this part, I said that we will be supporting these CSPs by providing them our solution at the back end. So that’s how our participation is in fact not needed. In fact, I would say that more the participation more will be the opportunity for us to work along with the CSPs and giving them the entire solution.
Prawal Jain
And the reason for doing that, the government did it because the AI mission, the 10,000 GPUs which they have to procure, that is taking time. So basically that’s the reason they wanted to have this standby kind of a thing wherein the startups, and they can be offered services immediately. So this is pure services play and that’s the reason we are supporting the CSPs. And so that suppose and CSPs will bid for it and they will take it directly. And this is only a very, very small part of it.
Sanjay Lodha
And just to add one more point, you mentioned that we are partnering with global OEMs. No, what we said that we being the OEM ourselves, we are using some of the platforms of like Nvidia and AMD and all, but ultimately, we produce our own systems. We are partnering be these CSPs for this smaller portion of the opportunity wherein CSPs are getting empaneled for rendering services to the end customers going to be provided by government of India. So ultimately, we will be the one who will be producing systems and giving the entire solution to these CSPs.
Hasmukh Devji Visaria
Got it. Thanks for clarifying.
Sanjay Lodha
Yeah.
Operator
Thank you very much. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you. And over to you.
Sanjay Lodha
Thank you so much. Thanks for your time. I really appreciate everybody’s time on this. And thank you for your questions. And thank you so much.
Operator
[Operator Closing Remarks]